Cisco Systems Inc. (NASDAQ:CSCO)

An analysis of the financial ratios and operational metrics over the reported periods reveals notable trends in inventory, receivables, payables management, and overall cash conversion efficiency.

Inventory Turnover and Average Inventory Processing Period

Inventory turnover shows a declining trend from 13.74 in 2020 to 6.28 in 2025, indicating a slower rate of inventory sales or usage. Correspondingly, the average inventory processing period increases from 27 days in 2020 to a peak of 65 days in 2024 before decreasing slightly to 58 days in 2025. This suggests that inventory is being held longer, potentially affecting liquidity and operational efficiency.

Receivables Turnover and Average Receivable Collection Period

Receivables turnover fluctuates moderately, decreasing from 9.01 in 2020 to a low of 7.79 in 2022, then rising to 9.74 in 2023 before settling around 8.45 by 2025. The average receivable collection period varies accordingly, initially increasing from 41 days in 2020 to 47 days in 2022, then improving to 37 days in 2023, and slightly lengthening again to 43 days in 2025. These variations imply episodic changes in credit and collection policies or customer payment behavior.

Payables Turnover and Average Payables Payment Period

Payables turnover rises from 7.94 in 2020 to a high of 9.19 in 2023, before decreasing to 7.86 in 2025. The average payables payment period shortens from 46 days in 2020 to 40 days in 2023, then elongates back to 46 days by 2025. This pattern indicates more prompt payments in the mid-period years, followed by a relaxation toward the end of the time frame.

Working Capital Turnover

Working capital turnover improves significantly from 2.7 in 2020 to 4.73 in 2023, showing enhanced efficiency in using working capital to generate sales. Data for 2024 and 2025 are unavailable, leaving the trend beyond 2023 unclear.

Operating Cycle

The operating cycle lengthens consistently from 68 days in 2020 to 110 days in 2024, with a slight reduction to 101 days in 2025. This elongation reflects an overall increase in the time required to convert inventory and receivables into cash.

Cash Conversion Cycle

The cash conversion cycle expands from 22 days in 2020 to a peak of 66 days in 2024, subsequently decreasing to 55 days in 2025. This indicates a growing gap between cash outflows and inflows, potentially stressing cash flow management, although the slight improvement in the final year may signal corrective measures.

In summary, the company experiences a general slowdown in inventory turnover with longer holding periods, fluctuating efficiency in receivables collection, and an initial trend toward faster payables payment before reversing. Operational cycles have lengthened considerably, increasing cash conversion cycle duration and implying potential challenges in cash flow management, despite some recent improvement. Working capital usage efficiency showed improvement up to the latest available data point.

Cost of Sales

The cost of sales displayed an overall increasing trend from 17,618 million US dollars in July 2020 to 21,245 million US dollars in July 2023, indicating a rise in expenses related to production or procurement. However, a decline is observed in July 2024 to 18,975 million US dollars, followed by a slight increase to 19,864 million US dollars in July 2025. This fluctuation suggests variability in the scale or efficiency of operations during these years.

Inventories

Inventory levels rose significantly over the period, starting at 1,282 million US dollars in July 2020 and peaking at 3,644 million US dollars in July 2023. After this peak, inventories decreased somewhat to 3,373 million US dollars in July 2024 and further to 3,164 million US dollars in July 2025. The initial sharp increase indicates growing stockpiles, potentially due to higher production or precautionary stocking. The subsequent reduction might reflect efforts to optimize inventory levels or changes in demand.

Inventory Turnover

Inventory turnover ratio shows a clear declining trend from 13.74 in July 2020 to 5.63 in July 2024, indicating that the frequency with which inventory was sold and replaced diminished substantially. A slight recovery is noted in July 2025 where the ratio increased to 6.28. The decreasing turnover ratio correlates with rising inventory levels and suggests slower movement of inventory, which could impact liquidity and operational efficiency. The minor improvement at the end may indicate initial signs of addressing this slowdown.

Revenue Trends

Revenue exhibited a generally upward trajectory from July 2020 to July 2025, increasing from approximately 49.3 billion US dollars in July 2020 to around 56.7 billion US dollars in July 2025. The growth was steady, with a temporary peak in July 2023 reaching nearly 57.0 billion US dollars, followed by a decline in July 2024 to about 53.8 billion US dollars before rebounding again in July 2025.

Accounts Receivable Trends

Net accounts receivable showed fluctuations over the period. Starting at about 5.5 billion US dollars in July 2020, the figure increased to around 6.6 billion US dollars by July 2022, then decreased in July 2023 to approximately 5.9 billion US dollars. It rose again in subsequent years to reach roughly 6.7 billion US dollars by July 2025. This pattern suggests variability in the collection period or credit policies over the years.

Receivables Turnover Ratio

The receivables turnover ratio experienced variations indicating changes in collection efficiency. The ratio declined from 9.01 in July 2020 to a low of 7.79 in July 2022, suggesting slower collections or increased credit sales. A significant improvement was noted in July 2023 with a rise to 9.74, before decreasing again in the following years to approximately 8.45 by July 2025. This implies fluctuations in how quickly the company converted receivables to cash throughout the period.

Integrated Analysis

Despite overall revenue growth, accounts receivable and receivables turnover exhibited inconsistent trends, indicating episodic changes in credit management or customer payment behavior. The dip in revenue in July 2024 coupled with an increase in accounts receivable suggests possible collection challenges or extended credit terms during that period. The rebound in both revenue and receivables turnover in the following year points to corrective measures or improved market conditions impacting financial performance.

The analysis of the financial data reveals notable trends in cost of sales, accounts payable, and payables turnover over the examined periods.

Cost of Sales

The cost of sales shows an overall upward trend from 17,618 million US dollars in 2020 to 21,245 million US dollars in 2023, indicating an increase in expenses related to production or procurement. However, there is a decline in 2024, dropping to 18,975 million US dollars, followed by a slight increase again to 19,864 million US dollars in 2025. This pattern suggests some volatility in cost management or changes in operational scale during these years.

Accounts Payable

Accounts payable steadily increased from 2,218 million US dollars in 2020 to 2,362 million in 2021, before experiencing minor fluctuations in the subsequent years. The payable amount remained relatively stable between 2,281 million and 2,313 million from 2022 to 2023, then slightly declined to 2,304 million in 2024 and increased again to 2,528 million in 2025. This suggests that the company maintained a generally consistent level of outstanding obligations to suppliers, with modest growth in recent periods.

Payables Turnover Ratio

The payables turnover ratio, measuring how frequently accounts payable are settled during a period, decreased from 7.94 in 2020 to 7.59 in 2021, indicating a slower payment cycle. Subsequently, it increased to 8.47 in 2022 and peaked at 9.19 in 2023, implying a faster settlement pace. However, the ratio fell again to 8.24 in 2024 and further to 7.86 in 2025. The fluctuations in this ratio point to variability in payment practices or supplier terms, with the most rapid payments occurring in 2023 and a general slowing thereafter.

The financial data exhibits several notable trends in key indicators over the analyzed periods.

Working Capital

The working capital shows a significant decreasing trend from July 25, 2020, through July 27, 2024. Initially, the working capital declines from 18,242 million US dollars in 2020 to 12,855 million in 2021, followed by a further reduction to 11,077 million in 2022. A minor recovery is noted in 2023 with an increase to 12,039 million. However, this is followed by a sharp decline into negative territory, reaching -3,722 million in 2024 and slightly improving yet still negative at -78 million in 2025. This pattern indicates a worsening short-term liquidity position over time, culminating in a state where current liabilities may exceed current assets in the latest periods.

Revenue

Revenue trends reflect overall growth with some fluctuations. Revenue increased steadily from 49,301 million US dollars in 2020 to 56,998 million in 2023. However, there is a notable decrease to 53,803 million in 2024 before rising again to 56,654 million in 2025. This pattern suggests a generally positive revenue growth trajectory with a temporary dip in 2024, which may correspond with external market factors or company-specific challenges.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently working capital is used to generate revenue, shows an improving trend from 2.7 in 2020 to 4.73 in 2023, indicating increasing efficiency in utilizing working capital to generate sales. Data for the years 2024 and 2025 are not provided, thus limiting analysis for these later periods. The rising ratio over the initial four years could be interpreted as improved operational efficiency despite declining working capital balances.

In summary, while revenue demonstrates a general upward trajectory with a minor setback in 2024, working capital declines sharply over the period analyzed, turning negative by 2024. The increasing working capital turnover ratio up to 2023 suggests improved efficiency in using available working capital, but the negative working capital in later years could signal liquidity risks. These developments warrant further investigation into the causes behind the declining working capital and its implications for financial stability and operational capacity.

Inventory Turnover

The inventory turnover ratio has exhibited a consistent downward trend from 13.74 in July 2020 to a low of 5.63 in July 2024, indicating a declining frequency at which inventory is sold and replaced. A modest recovery is observed in July 2025, with the ratio increasing slightly to 6.28.

Average Inventory Processing Period

The average number of days inventory is held before being processed shows an inverse trend relative to the inventory turnover ratio. It has increased steadily from 27 days in July 2020 to a peak of 65 days in July 2024. This suggests that inventory is remaining on hand for longer periods. In July 2025, a decrease to 58 days is noted, indicating some improvement in inventory turnover efficiency.

Overall Analysis

Over the span of these years, there is a clear indication of a decline in operational efficiency related to inventory management, with the company holding inventory longer and turning it over less frequently. The slight improvements seen in the most recent period could signal initial steps towards addressing these issues. Continued monitoring is advised to determine if these improvements are sustained.

Receivables Turnover

The receivables turnover ratio exhibits fluctuations over the analyzed periods. Starting at 9.01 in the fiscal year ending July 25, 2020, it experienced a gradual decline to 7.79 by July 30, 2022. Subsequently, there was a notable increase peaking at 9.74 in the period ending July 29, 2023. The ratio then declined again to 8.05 the following year, slightly recovering to 8.45 in the most recent period. These variances suggest variability in the efficiency with which the company collects its receivables, without a clear upward or downward trend over the six-year span.

Average Receivable Collection Period

The average receivable collection period portrays a somewhat inverse pattern relative to the receivables turnover. Beginning at 41 days in 2020, it slightly increased to 42 and then further to 47 days by 2022, indicating a slower collection process during this time. However, in the fiscal year ending July 29, 2023, the collection days dropped significantly to 37, suggesting improved collection efficiency. This improvement was not fully sustained, as collection days increased again to 45 in 2024, before slightly decreasing to 43 days in 2025. Overall, the collection period shows variability but no sustained long-term improvement.

Overall Insights

The interplay between receivables turnover and average collection period reflects fluctuations in accounts receivable management. Periods of higher turnover correspond with shorter collection periods and vice versa, adhering to expected financial relationships. The data does not reveal a consistent trend of improvement or deterioration, but rather indicates episodic changes in collection effectiveness. This pattern might warrant closer examination to identify underlying causes and stabilize receivables management performance.

Average Inventory Processing Period

The average inventory processing period exhibits a rising trend from 27 days in July 2020 to a peak of 65 days in July 2024, indicating that inventory stayed longer before being processed. In July 2025, there is a noticeable decrease to 58 days, suggesting some improvement in inventory turnover efficiency compared to the previous year, yet still significantly higher than the initial period.

Average Receivable Collection Period

This metric remains relatively stable across the periods, fluctuating within a narrow range from 41 days in July 2020 to 43 days in July 2025. The lowest point of 37 days occurred in July 2023, reflecting a temporary improvement in the speed of receivable collections. Overall, the data suggests consistent management of receivables without significant escalation or reduction over the years.

Operating Cycle

The operating cycle, which combines the inventory processing and receivable collection periods, generally lengthens over time. Starting at 68 days in July 2020, it escalates to a high of 110 days in July 2024, denoting an extended timeframe for cash conversion. By July 2025, the cycle shortens slightly to 101 days but remains elevated compared to the baseline, implying that the overall operational efficiency in converting resources to cash has deteriorated over the reporting timeline.

Payables Turnover

The payables turnover ratio exhibits some variability over the reported periods. Beginning at 7.94 in July 2020, the ratio slightly decreased to 7.59 in July 2021 but then experienced an upward trend, reaching a peak of 9.19 in July 2023. Subsequently, the ratio declined to 8.24 in July 2024 and further to 7.86 in July 2025. This pattern suggests fluctuations in the frequency with which payables are settled, with the most rapid payments occurring around 2023, followed by a moderation in subsequent years.

Average Payables Payment Period

The average payables payment period, measured in days, inversely corresponds to the payables turnover ratio. The period increased from 46 days in July 2020 to 48 days in July 2021, indicating slightly longer payment cycles. This was followed by a decrease to 43 days in July 2022 and a further reduction to 40 days in July 2023, demonstrating faster payment to suppliers during this timeframe. After 2023, the payment period increased again to 44 days in July 2024 and returned to 46 days by July 2025.

Overall Insights

Throughout the timeframe analyzed, there is a clear cyclical pattern in payment behavior. The period from 2021 to 2023 saw improvements in payables turnover and reduced payment periods, potentially reflecting enhanced liquidity or an operational strategy focused on quicker supplier payments. However, the trend reverses post-2023, with a decline in turnover and lengthening payment periods, suggesting a shift towards slower payments. The values at the end of the period nearly revert to the initial levels observed in 2020, indicating a return to previous payment practices.

Inventory Processing Period

The average inventory processing period exhibited an upward trend from 27 days in 2020 to a peak of 65 days in 2024, indicating a lengthening time to process inventory over these years. In 2025, a decline to 58 days was observed, suggesting a partial improvement in inventory turnover efficiency.

Receivable Collection Period

The average receivable collection period showed moderate fluctuations. Starting at 41 days in 2020, it increased to 47 days by 2022, reflecting slower collection. A notable improvement occurred in 2023, with the period decreasing to 37 days, followed by slight increases in 2024 and 2025 to 45 and 43 days, respectively. Overall, the collection period remained relatively stable with some variability.

Payables Payment Period

The average payables payment period demonstrated a slight downward trend initially, from 46 days in 2020 to 40 days in 2023, indicating faster payments to suppliers. Subsequently, it reversed course, increasing to 44 days in 2024 and returning to 46 days in 2025, suggesting a move back towards longer payment terms.

Cash Conversion Cycle

The cash conversion cycle lengthened substantially over the reported period, beginning at 22 days in 2020 and peaking at 66 days in 2024. This trend reflects increasing capital tied up in working capital processes. There was some improvement in 2025, with the cycle reducing to 55 days, but overall it remained significantly elevated compared to the initial year.